Acme makes and sells two products, the Alpha and the Beta.

Acme currently employs a traditional costing system, using one, plant$-$wide overhead rate based on direct labor hours. The budgeted manufacturing overheads for the year amounted to $$500,000,$ and the total labor hours for the year were expected to be $10,000$ hours, of which $75\%$ were expected to be direct labor hours, and $25\%$ were expected to be indirect labor hours.

To begin using activity$-$based costing, Acme also calculated budgeted overheads in terms of the following three activities:

Activity Cost Pool

Activity Cost

Activity Cost Driver

Processing

$$160,000$

$2,000$

Materials Moves

Quality control

$$240,000$

$600$

Number of Inspections

Shipping

$$100,000$

$200$

Number of Shipments

The following data concerns the actual manufacture of one unit of Alpha and one unit of Beta respectively:

Alpha

Beta

Net sales price

$$2,700\mathrm{.}00$

$$2,300\mathrm{.}00$

Direct materials cost $($@$$5$ per lb$.)$

$$50\mathrm{.}00$

$$50\mathrm{.}00$

Direct labor cost $($@ $$10$ per hr$)$

$$220\mathrm{.}00$

$$180\mathrm{.}00$

Machine Hours

$12$

$7$

Materials Moves

$3$

$1$

Number of Inspections

$1$

$1$

Number of Set$-$ups

$2$

$5$

Number of Shipments

$1$

$3$

Calculate the total cost of each unit of Beta using activity$-$based costing? $($Show your calculations for full credit.$)$

Which activity is most responsible for driving up the cost of the higher cost product?

Does ABC reveal anything striking about the profitability of each product? And what changes would you recommend if any?